File - In this Aug. 9, 2013 file photo, FCC Commissioner Ajit Pai presents his dissent during a Federal Communications Commission (FCC) hearing at the FCC in Washington. Pai is asking the nations largest hotel chains whether they require guests to dial 9 before 911 in the wake of a Texas girls struggle to call for help while her mother was being stabbed.(AP Photo/Susan Walsh, file)

FCC Chief Says Economics Will Play Larger Role in Future Policies

The head of the Federal Communications Commission announced Wednesday the creation of a new economics office at the agency to help guide future policymaking, something critics of the FCC say it has lacked in recent administrations.

Republican FCC Chairman Ajit Pai said he wants economics to play a much larger role in the agency’s rulemaking process, and highlighted a number of ways it hasn’t in recent years.

“Since 1980, FCC experts have submitted nearly 90 papers. Since 2012, the number is zero,” Pai told a crowd gathered at the Hudson Institute Wednesday. “According to [the Office of Management and Budget]’s 2016 assessment, the FCC issued 11 major rules from 2006 to 2015. By their count, not one was accompanied by an estimate of benefits or costs. Zero.”

That includes a number of landmark rules considered and passed under the Obama administration, including net neutrality, privacy rules for internet providers, price caps for high-capacity business broadband and letting third-parties enter the cable box market.

Pai and numerous lawmakers and regulators on both sides of the political aisle often criticized his predecessor, former Chairman Tom Wheeler, for charging ahead with regulations without what many described as a meaningful economic analysis of their repercussions.

“A great example of this problem is the commission’s Title II Order,” Pai said referring to the 2015 net neutrality rules. “The FCC’s chief economist at the time of the Title II Order’s adoption has joked that it was an ‘economics-free zone.’ It certainly didn’t include a traditional cost-benefit analysis. He then clarified more seriously that ‘a fair amount of economics [in it] was wrong, unsupported, or irrelevant.'”

Former FCC Chief Economist Tim Brennan, whom Pai was referring to, previously described his former role at the agency as akin to working in a broom closet-sized office, where he was rarely consulted, and said decisions at the eighth floor aren’t made with a substantial amount of economic input.

“If the FCC wants to do something, it apparently has to squeeze them into economics boxes, and I think the process of that squeezing is why you get economics that doesn’t, in some cases, look very good,” Brennan said last July.

Brennan and other noted telecom and former FCC economists described Wheeler’s tenure as a departure from the previous 30 years of agency policymaking, and one that threatened to set a dangerous precedent.

Pai plans to change that with the creation of an Office of Economics and Data (OED), which he envisions “providing economic analysis for rulemakings, transactions, and auctions; managing the commission’s data resources; and conducting longer-term research on ways to improve the commission’s policies.”

The chairman said the office will ensure economics are considered “at the beginning, not the end, of the deliberative process,” manage the agency’s data, reports and analyses, look at the long-term impact of regulation on emerging technologies, and eliminate unnecessary paperwork and filing requirements for companies.

“For instance, what’s the impact on FCC policies of the Internet of Things, with billions of new devices dotting the landscape and operating at low power? What’s the impact of the densification of wireless networks and higher demands for fiber backhaul on our long-range infrastructure rules?” Pai said, adding the office will consider the long-term value of assets like federally-held, high-band and unlicensed airwaves.

The first step will be the creation of a working group of economists at the agency to decide how it should be structured and function with the rest of the agency, and what powers and responsibilities the OED will be charged with.

“We have the Office of General Counsel to make sure that our legal reasoning is sound,” he continued. “We have the Office of Engineering and Technology to make sure that our work reflects sound engineering policies. And we should have an Office of Economics and Data to make sure that our choices are informed by sound economic principles and solid data.”

Noted telecommunications market economists including Hal Singer, who co-authored a paper last year calling on Congress to mandate the FCC conduct economic analyses before implementing rulemakings, celebrated Pai’s announcement.

Pai announces the creation of the Office of Economics and Data at the FCC#FCCLive

Harold Feld, senior vice president of the pro-net neutrality group Public Knowledge, defended the Obama FCC’s use of economics last summer, discounting Singer and others as “right-leaning economists” who disagreed with the rules themselves.

“I think there is a difference between saying the FCC is an ‘economics-free zone’ and saying that they use economic methodologies that you personally do not like, and do not regard as legitimate,” Feld said.